Research from Statista confirms that the luxury market is on a positive trendline:

• Revenue in the Luxury Goods market amounts to £13.3bn in 2023
• The market is expected to grow annually by 4.25% (CAGR 2023-2028). 
• The market’s largest segment is the segment Luxury Fashion with a market volume of £5.7bn in 2023.

Data from our own retail clients shows a similar trend – even when times are tough and budgets are tight, customers will often be willing to shell out a little extra to stay true to their beloved brand. We saw the signature collection of one of our luxury fashion clients sell out quicker than their ‘on sale’ products.

The power of emotional spending is not to underestimate. In fact, new survey findings from Credit Karma reveal that young consumers are more likely to be driven by emotions than logic. Over half of Gen Z and Millennials consider themselves emotional spenders. So, for digital marketers, tapping into the emotional side of consumer behavior could be the key to unlocking sales and forging deeper connections with their audience.

The emotions that drive people to spend

According to Credit Karma’s research, happiness is the top emotion driving people to indulge in emotional spending, with a whopping 29% of respondents citing it as their primary motivator. Boredom came in at a close second, with 28% of people using shopping as a way to pass the time.

Interestingly, even on bad days, people are more likely to treat themselves with a shopping spree, with 22% of respondents admitting to using retail therapy to lift their mood.

When it comes to specific age groups, it seems that Gen Z and millennials are the most likely to indulge in emotional spending, with 58% of Gen Z respondents saying they would treat themselves on a good day, and 59% saying they would do the same on a bad day. 

It’s clear that emotions play a significant role in consumer behavior, and understanding these motivations could be the key to successful marketing.

Emotions and brand loyalty

Emotions can make consumers  fiercely loyal to certain brands creating a sense of satisfaction and happiness that can translate into brand loyalty. And let’s face it, that’s a big deal for businesses.

According to a study by CapGemini, nurturing a relationship with emotionally invested customers can have a significant impact on a brand’s success. To get a better understanding of how emotions and rational factors impact loyalty levels, Capgemini developed several indices that measure the influence of emotional factors, rational factors, and brand values on customer loyalty across industries. Retail emerged as the clear winner, scoring the highest across all sectors. In fact, the correlation between emotions and loyalty among retail customers was off the charts – it’s no wonder that retailers are always trying to create a memorable shopping experience that leaves their customers feeling happy and fulfilled.

So, what does this mean for businesses? It’s clear that understanding and catering to your customers’ emotional needs is just as important as providing great products and services. By focusing on creating a positive emotional connection with your customers, you can increase their loyalty and turn them into lifelong fans of your brand.

In fact, emotionally loyal customers are not only more likely to stick around, but they’re also more likely to spend more money. The research shows that a whopping 70% of emotionally engaged consumers spend up to two times more on brands they’re loyal to, compared to just 49% of those with low emotional engagement.

Brand loyalty and emotions

While Flash Sales are a popular tool for achieving quick wins, especially in a turbulent economy, some of our luxury retail clients have responded by putting more emphasis on their best-selling products and collections. For example, one client launched a few products from their signature collection in January, which performed exceptionally well, with a dress selling out within a day. This success has led the brand to release new drops throughout the whole month of March, focusing on reaching the emotional side of consumers and pushing for full-price items. And it worked!

Money talks, but loyalty whispers sweet nothings that can keep customers coming back for more, even in tough economic times. When customers feel a deep emotional connection with a brand, they’re more likely to stick with it, even if there are cheaper options available. This loyalty is about more than just the tangible benefits of a product or service. Loyal customers associate their brand of choice with quality and prestige that makes it stand out from the crowd. Even when times are tough and budgets are tight, customers will often be willing to shell out a little extra to stay true to their beloved brand.

As a digital marketer, it is important to understand the need for brands to protect their bottom line while responding to changes in consumer behavior. By going back to the essentials and promoting timeless, proven products, brands can ensure their revenue targets are met, while also providing value to their customers.

Emotionally driven purchases also often come with a higher price tag, as consumers are willing to pay more for products or services that bring them joy or fulfill an emotional need. 

Can retailers safeguard their brand’s reputation amidst the flash sale frenzy?

Yes. And here’s how:

• Despite economic uncertainty, consumers are still willing to splurge on big-ticket items that hold emotional value.
• Gen Z and Millennials are more likely to be driven by emotions than logic.
• Emotionally loyal customers are more likely to spend up to two times more on brands they’re loyal to compared to those with low emotional engagement.
• Retail customers show the highest correlation between emotions and loyalty, making it crucial for businesses to cater to their emotional needs.
• Nurturing a relationship with emotionally invested customers can have a significant impact on a brand’s success, with emotionally driven purchases often coming with a higher price tag.
• Going back to the essentials and promoting timeless, proven products can help brands protect their bottom line while also providing value to their customers.

The conclusion is obvious. Investing in your brand and upper funnel activity is more crucial than ever if you want to protect your brand and avoid discounting.

Want to learn more about growing your retail business during a recession? Download our latest whitepaper; Retail Resilience.